Personalisation and the changing face of banking

Today’s millennials expect a range of services, on their phones or tablets. All at the click of a button, while being on the move. Clearly, the world is going completely mobile.

A significant demographic for the banking industry is that nearly 65 percent of India’s population is below the age of 35. Consumers expect banks to look and act more like their non-financial partners in how they gather and use their personal and transaction data. It’s a thought that may not have struck the banking industry two decades ago. But, with the the face of banking being transformed rapidly, several banks have stepped up their game, and there is huge scope for innovation.

One of the most essential ingredients, in understanding customer needs and behaviour – is data. With technological advancements, the financial industry has learnt how to make use of this data more effectively.

Big data has altered the dynamics of banking in the development of digital banking. It runs parallel to traditional over-the-counter banking. Though the latter enjoys the patronage of customers from the pre-digital era, in recent years, banks are expected to deliver the same kind of personalised services, offered by their competitors in the financial services field.

These competitors are not necessarily other banks, but organisations that offer certain financial services. For instance, private wealth management firms, who invest in customer engagement. In an economically unstable climate, the need for better financial planning has gained ground. Customers would like advice on a plethora of financial decisions including, how much to invest and where, mutual funds versus fixed deposits, which mutual funds perform better and so on.

With the demonetisation wave last November, the Indian government is now encouraging cash-less transactions. This change has given e-wallet firms like Paytm, PayUMoney and Oxygen a big boost. Some of these firms are digitally superior to banks. So, this is a wake-up call for banks and financial institutions, to keep pace and deliver similar services.

In recently conducted surveys, many customers felt that their banks didn’t understand their short and long term financial needs and goals well enough.

One big personalisation gap that banks should fill is to provide better financial planning services. Continuous engagement does better at enhancing the personalisation experience with customers, than a handful of face-to-face meetings. Examples of engagement include sending alerts to their clients about unusual activity in their accounts, information on their spending activities, encouraging direct debits of bill payments, information on third-party services, tailored relevant offers, etc.

Some of the leading banks in India have set the trend in personalisation. HDFC Bank took the lead in the use of analytics back in the early 2000s. The gains were understanding customers’ financial habits and their personal habits, thereby allowing them to promote offers accordingly.

State Bank of India, country’s largest public-sector bank, is also using analytics to track its own services. They apply their data models to education loans, housing loans etc. in a bid to cut down on bad loans. For instance, in giving student loans, they research what colleges in which cities, have the most number of defaulters. This helps SBI adjust their terms for increased risk.

One of the key takeaways from The Digital Banking Report sponsored by Personetics, is that personalisation across all stages of the consumer journey will be a key differentiator for banking in the very near future.

A good option for larger banks – especially those with legacy, is to collaborate with fintech start-ups. The fresh ideas and technologies like big data and AI, that these fintechs bring in, will help banks scale up their operations quickly and effectively.

As banks look to build their digital brand, the important thing to note is that the primary business of banking won’t go away. What customers do expect from their banks, however, is to understand where they stand financially and the predict what may lie ahead.